Eurasian labeling, localization of foreign producers, a handicap for domestic companies - adaptation of the pharmaceutical market to the new reality: the experience of the Republic of Kazakhstan.
Photo source: SK-Pharmacia
The past turbulent year of#nbsp;2022 has changed the balance of#nbsp;power in#nbsp;all major sectors of#nbsp;the economy, which traditionally include pharma. The changes were felt most seriously by#nbsp;the countries of#nbsp;Eurasian Economic Cooperation, particularly Kazakhstan. In#nbsp;the first six months of#nbsp;last year, the pharmaceutical industry of#nbsp;the Republic strengthened by#nbsp;an#nbsp;average of#nbsp;4.9%. According to#nbsp;the reports of#nbsp;the international company IQVIA, the volume of#nbsp;the local market, at#nbsp;the end of#nbsp;the first three quarters of#nbsp;2022, increased by#nbsp;13% year-on-year to#nbsp;587 billion tenge ($#nbsp;1.28 billion). Domestic manufacturers are noticeably gaining positions#nbsp;— the share of#nbsp;Kazakhstani drugs in#nbsp;the total structure of#nbsp;the pharmaceutical market has approached 20%. However, the influence of#nbsp;foreign manufacturers within country is#nbsp;still strong, and this could be#nbsp;a#nbsp;new growth driver for the industry. Viacheslav Lokshin, President of#nbsp;the Association of#nbsp;International Pharmaceutical Manufacturers of#nbsp;the Republic of#nbsp;Kazakhstan, told Adam Smith Conferences in#nbsp;an#nbsp;exclusive interview about the plans for the development of#nbsp;Kazakhstani pharma in#nbsp;the new year 2023.
—#nbsp;Viacheslav Notanovich, if#nbsp;we#nbsp;talk about the results of#nbsp;the past year#nbsp;— what were the main problems faced by#nbsp;the pharmaceutical industry of#nbsp;Kazakhstan?
It#nbsp;was in#nbsp;every sense quite a#nbsp;difficult period for Kazakhstan and for our region as#nbsp;a#nbsp;whole. It#nbsp;began with the events of#nbsp;January, which greatly changed our perception of#nbsp;what was going on, forced us#nbsp;to#nbsp;rethink achievements and prospects in#nbsp;all areas of#nbsp;the economy and life. All the changes that were taking place, including the new presidential election, people supported. After all, there is#nbsp;no#nbsp;economy without politics.
At#nbsp;the very beginning of#nbsp;2022, we#nbsp;were still largely impacted by#nbsp;the covid pandemic#nbsp;— the active phase was over, but there were plenty of#nbsp;problems.
Also in#nbsp;2022, changes to#nbsp;the Law on#nbsp;Compulsory Social Health Insurance came into force in#nbsp;Kazakhstan, and we#nbsp;also saw a#nbsp;number of#nbsp;new problems. Plus, a#nbsp;lot of#nbsp;things have become obsolete in#nbsp;healthcare by#nbsp;this point: both the equipment and our medical infrastructure, but the important thing is#nbsp;that the state kept its promises, in#nbsp;particular, the obligations on#nbsp;drug provision were fulfilled. $#nbsp;600 million were spent on#nbsp;it#nbsp;during that period#nbsp;— more than half of#nbsp;the total pharmaceutical market.
Another important milestone#nbsp;— in#nbsp;2022, we#nbsp;launched the Public Fund QAZAQSTAN HALQYNA created by#nbsp;the President to#nbsp;solve problems in#nbsp;the field of#nbsp;health care, education and social support, which provided drug products for children with orphan diseases. This is#nbsp;a#nbsp;very important component. Where the state cannot help today, the foundation does.
—#nbsp;To#nbsp;what extent has the market situation in#nbsp;pharma changed within Kazakhstan itself? Which niches and drug products have shown the most growth?
We#nbsp;saw a#nbsp;really dramatic change in#nbsp;the situation during the covid pandemic. There was a#nbsp;roaring demand for the vaccine, related drug products like Fraxiparin, Xarelto, Rivaroxaban.
Now the trend is#nbsp;returning that the structure of#nbsp;the drug market again corresponds to#nbsp;the drug products of#nbsp;morbidity and mortality: I#nbsp;am#nbsp;talking about drug products for cancer, endocrine pathologies, cardiovascular and respiratory diseases. The situation is#nbsp;leveling off. We#nbsp;are returning from a#nbsp;military production structure to#nbsp;a#nbsp;planned one. Non-infectious diseases should still take the most serious power.
—#nbsp;Is#nbsp;the share of#nbsp;domestic drug products in#nbsp;the overall market structure high in#nbsp;the country?
This is#nbsp;an#nbsp;average indicator for the Eurasian space. Once upon a#nbsp;time, in#nbsp;the 90s this figure was only 3%. And in#nbsp;SK-pharmacy procurement it#nbsp;is#nbsp;more than 50% at#nbsp;all.
—#nbsp;Has the current environment affected the conduct of#nbsp;clinical trials in#nbsp;the country? Did you have to#nbsp;put any projects on#nbsp;hold?
On#nbsp;the contrary, Russian CRO agencies are going to#nbsp;come to#nbsp;us. It#nbsp;is#nbsp;hoped that the frequency of#nbsp;research will only increase.
—#nbsp;Are there any factors that now directly complicate and hinder the functioning of#nbsp;the unified Eurasian pharmaceutical market?
Yes, there are problems here. There are difficulties with the Eurasian registration of#nbsp;drug products#nbsp;— it#nbsp;is#nbsp;not active enough for manufacturers. Many players want to#nbsp;keep the national registration. The topic is#nbsp;now being actively debated. If, for example, a#nbsp;drug product leaves the Russian market, we#nbsp;do#nbsp;not want it#nbsp;to#nbsp;leave our market and the markets of#nbsp;other countries.
A#nbsp;rather painful problem also has to#nbsp;do#nbsp;with labeling. Unfortunately, we#nbsp;have dragged this issue out, and Russia has often been a#nbsp;brake on#nbsp;mutual recognition processes. In#nbsp;this sense, your processes are more bureaucratized, and it#nbsp;is#nbsp;understandable#nbsp;— the country is#nbsp;big. Many agreements that should have been reached by#nbsp;now, we#nbsp;still have not reached. This general Eurasian registration, for example, which was much talked about earlier, as#nbsp;a#nbsp;result, not as#nbsp;many applicants managed to#nbsp;pass it#nbsp;as#nbsp;we would have liked.
—#nbsp;Have sanctions changed the balance of#nbsp;power in#nbsp;the Eurasian pharmaceutical market?
That’s a#nbsp;pretty tricky question. Kazakhstan in#nbsp;the proposed conditions realizes that, on#nbsp;the one hand, there is#nbsp;the framework of#nbsp;the Eurasian Union, but on#nbsp;the other hand#nbsp;— there is#nbsp;the threat of#nbsp;secondary sanctions. Cooperation, given the international geopolitical situation, is#nbsp;of#nbsp;course becoming increasingly complex.
But, as#nbsp;our President emphasized earlier, Russia remains Kazakhstan’s priority partner in#nbsp;many areas of#nbsp;business, including pharmaceuticals. However, being today a#nbsp;transshipment base for, say, imported medicines, for substances, most likely, will not work to#nbsp;the fullest extent. This is#nbsp;now, for example, already evident in#nbsp;the cars that have begun to#nbsp;be#nbsp;bought and transported to#nbsp;Russia. Everyone realizes that if#nbsp;the volume of#nbsp;such deals becomes too visible, our partners will react negatively. While it#nbsp;is#nbsp;difficult to#nbsp;make long forecasts, I#nbsp;hope that market assessment will soon show us#nbsp;that maybe some drug products or#nbsp;substances will really leave the Russian market, and their sales in#nbsp;Kazakhstan, for example, will increase.
—#nbsp;How can difficulties with filing under the EAEU procedures be#nbsp;resolved?
The solution is#nbsp;to#nbsp;negotiate. It#nbsp;is#nbsp;necessary to#nbsp;look for opportunities for maximum mutually beneficial cooperation in#nbsp;the field of#nbsp;mutual trade in#nbsp;medicines, mutual registration of#nbsp;medicines, thus expanding the market for its own manufacturer. Remove unnecessary problems along the way. We#nbsp;have almost 7,000 kilometers of#nbsp;common land border with Russia, so#nbsp;we#nbsp;need to#nbsp;cooperate. And the processes of#nbsp;integration will undoubtedly develop.
In#nbsp;particular, this is#nbsp;what we#nbsp;will be#nbsp;talking about at#nbsp;the upcoming forum. We#nbsp;will discuss the market problems I#nbsp;mentioned here, we#nbsp;will seriously discuss ethical problems of#nbsp;competition between manufacturers, we#nbsp;will talk about medical ethics and the need to#nbsp;adopt a#nbsp;medical code of#nbsp;ethics for our health care workers, and our interaction with the Center for Registration of#nbsp;Drug Products will also be#nbsp;on#nbsp;the agenda. All of#nbsp;these things are extremely important right now.
—#nbsp;What tasks does the pharmaceutical industry of#nbsp;Kazakhstan set for itself in#nbsp;2023?
There are serious plans for 2023. Just recently we#nbsp;had a#nbsp;board meeting of#nbsp;the Ministry of#nbsp;Health, where we#nbsp;discussed the fact that the financing of#nbsp;the industry will increase despite the devaluation processes.
The main direction in#nbsp;development is#nbsp;to#nbsp;expand the list of#nbsp;available medicines and expand the list of#nbsp;diseases for state provision of#nbsp;drug products. Further#nbsp;— this is, of#nbsp;course, support for the domestic pharmaceutical industry and an#nbsp;attempt to#nbsp;localize active international manufacturers as#nbsp;much as#nbsp;possible#nbsp;— for example, just recently we#nbsp;had the head of#nbsp;the board of#nbsp;the Swiss concern Roche Holding#nbsp;AG. Johnson & Johnson, Novo Nordisk and AstraZeneca have plans to#nbsp;expand their influence in#nbsp;Kazakhstan. It#nbsp;would also be#nbsp;desirable to#nbsp;move away as#nbsp;much as#nbsp;possible from the forced regulation of#nbsp;prices in#nbsp;the pharmacy segment.
Top 15 companies by share in the volume of Kazakhstan pharmaceutical market 2022, source: IQVIA
Problems, of course, always remain: lack of funding, the state is slow to register prices, sometimes it is because there are simply not enough resources. Decisions are sometimes quite slow - we all understand this, we are working on the issues of interaction. But most importantly, we have established interaction with our partners, with legislators.
There is another interesting fact: revenues to the National Fund of the Republic of Kazakhstan and tax revenues in 2022 increased almost 2.5 times. That means a lot of money was being diverted out of the country before that. Returns are now being made - this is also an important factor and trend. So the situation, from my point of view, is optimistic.